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Federal Reserve officials are expected to maintain their hawkish stance at next week’s policy-setting meeting, where they are likely to approve another oversized interest rate hike, paving the way for borrowing costs to rise above 5% by March 2023, according to the poll. . Bloomberg economists.

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The survey showed that the majority of respondents expected that The Fed will raise rates by 75 basis points for the fourth meeting in a row. The Federal Open Market Committee will announce its decision after a two-day meeting on Tuesday and Wednesday. A basis point is equal to one hundredth of a percent.

The US central bank will then approve a 50 basis point increase in December, followed by a 25 basis point increase in the next two meetings in February and March, participants predict. According to the study, a rapid tightening of policies could trigger a recession in the US and around the world.

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“Inflationary pressures remain intense and the Fed is set to raise rates by 75 basis points in November,” James Knightley, chief international economist at ING Groep, said in a survey response. “We currently forecast a more subdued 50 basis point gain in December given the deteriorating economic and market environment.”

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Traders estimate there is more than an 80% chance of another 75 basis point gain after the Fed’s two-day meeting closes next week, according to the FedWatch CME Group tool that tracks trade. Only 18% believe the Fed will go half a point higher instead. The Fed has taken no action to dispel those expectations.

Officials may also take steps to raise rates even higher than they expected as early as September, as elevated inflation persists despite higher interest rates. The US central bank has forecast a peak rate of 4.6% next year, but it could increase depending on upcoming economic data.

The US central bank is on one of the fastest courses in history to increase the cost of borrowing and slow down the economy. Officials approved a third consecutive 75 basis point rate hike in September, raising the federal funds rate to a range of 3.0% to 3.25% – a near restrictive level – and showed no signs of slowing down as they try to quell runaway inflation.

A Labor Department report released earlier this month showed that the consumer price index, a broad measure of prices for everyday goods including gasoline, groceries and rent, rose 0.4% in September from the previous month and 8. 2% year on year, much faster than experts had predicted.

US inflation

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“We have not yet made significant progress in the fight against inflation,” said Fed Chairman Christopher Waller during a recent speech.

In even more worrisome developments that suggest underlying inflationary pressures in the economy remain strong, benchmark prices, which exclude more volatile food and energy performance, rose 0.6% in September from the previous month. Compared to the same period last year, prices for staples jumped 6.6%, the highest since 1982.

“The CPI has risen sharply, which virtually guarantees the Fed will raise rates by 75 basis points next month and at least 50 basis points in December,” said Robert Frick, corporate economist at the Navy Federal Credit Union. “And we need to brace for more bad news in October and November, as rising oil prices are likely to turn from lower to higher inflation again.”